Smargon v. Grand Lodge Partners

288 P.3d 1063 (2012)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Ps entered into a contract with D for the purchase of a resort condominium unit (the Unit) near Park City, Utah. At the time of contracting, construction had not yet begun on the condominium development. Ps paid D an option payment of $154,900 to reserve the Unit. In March 2005, Ps reviewed the plans for the project and became aware that a mechanical room would be located across the hall. The mechanical room would house a large chiller that would provide climate control for the development. Ps voiced concerns about the location of the mechanical room and the disturbance it could create in the Unit. D wrote that '[it] would make every effort to mitigate the noise through insulation and extra construction methods to ensure that the noise is reduced to an acceptable level.' Ps let pass a time-limited option to rescind the Contract and paid D an additional $154,900 as an earnest money deposit. Ps spent $92,717.17 to make several upgrades to the Unit, including, among other things, the installation of an exterior door and custom flooring and countertops. A closing date was set for August 10, 2007, and Ps wired the balance of the $1,549,000 purchase price into escrow in anticipation. The day before the scheduled closing, Ps conducted a walk-through inspection of the Unit. Ps were to create a 'punch list' of needed repair work. The Contract stated, “the punch list was for work needed to achieve substantial completion of the . . . Unit.' Ps immediately noted a problem with the custom flooring, which they marked with blue tape. The walk-through was soon disrupted, by noise and vibration emanating from the equipment in the mechanical room. Ps cut short the inspection and did not complete a punch list of needed repair work. Ps did not attend the scheduled closing. D stated it did not expect Ps to close on the Unit at that time. D still requested that they complete a punch list to address needed repair work, including the noise and vibration problem. Ps declined to do so. Ps took the position that if they decided not to purchase the Unit, D should refund both their option payment and earnest money deposit, as well as the amount they had spent to upgrade the Unit. They also requested that D pay them the substantial appreciation in the value of the Unit from the date the Contract was executed to the date scheduled for closing, reasoning that they had missed the opportunity to purchase a comparable unit in this or another condominium development when such units were similarly priced. D claimed that 'the sound levels are, under normal conditions, much lower than you heard.' D described some specific actions it 'might do to further reduce the noise levels,' such as to 'put in spring isolators and dampers under the chiller,' 'put a sound blanket on the chiller,' and 'put isolators at pipe wall penetrations.' D asserted that these actions 'should greatly reduce the noise,' and it 'expected better than industry standards verifiable by acoustical instruments.' D insisted on the performance of the contract. D was willing to release P from the contract but not pay for appreciation. Ps eventually sued D for breach of contract, and D counterclaimed for breach of contract too. The court awarded Ps their option payment and earnest money deposit with applicable interest. The court held that the expectancy damages for the appreciation in value of the Unit from the date of the Contract to the date of the scheduled closing were barred by the Contract's liquidated damages provision because such damages were 'incapable or very difficult of accurate estimation at the time of execution of the contract.' The court awarded Ps reliance damages to compensate them for the amount they had paid for upgrades to the Unit. D appealed.